Arizona consumers remain glum about economy, jobs

by Howard Fischer - Sept. 1, 2011 12:00 AMCapitol Media Services

Arizonans did not need August's dramatic swings in the stock market to tell them the economy is in trouble.

A state consumer-confidence report says the number of people considering new purchases remains "dismal" and is half as high as it was before the Great Recession. The Behavior Research Center tracks changes in the Arizona Consumer Confidence Index through telephone surveys of state residents.

Shoppers continue to hang on to their cash, said Bruce Hernandez, senior vice president at the center.

The index is essentially a measure of how Arizonans feel about current and future economic conditions. In August, consumer confidence was 54. That's small uptick from 51.9, it's level three months earlier.

But confidence remains half of what it was in 2006, before the economic boom went bust. Then, it exceeded 100.

The survey was conducted at the end of July, before the sharp losses in the stock market in early August, Hernandez said. That news alone would have pushed the numbers sharply lower, he said.

Earlier optimism about the economy has changed, said Dennis Hoffman, an economics professor at the W.P. Carey School of Business at Arizona State University.

"The once-promising hopes of accelerating growth in the second half of 2011 are fading as it becomes clear that consumer confidence continues to languish," he said.

"Without improvements in confidence, businesses will be slow to hire," Hoffman said. The phenomenon has created a "perpetual circle of no confidence, no jobs - and no jobs, no confidence."

That's also the assessment of Lee McPheters, another economics professor at the W.P. Carey school.

"The consumer is out of the game," he said. "That is not going to change until hiring changes, unemployment changes, home prices stop falling."

Just one in five Arizonans consider current business conditions good, compared with 43 percent who say times are bad, according to the Behavior Research Center's survey of 716 Arizona residents.

And while 25 percent of those questioned say business conditions will be better six months from now, two-thirds say that things won't get better or may actually get worse.

And nearly a third of Arizonans believe there will be even fewer jobs by the end of the year than there are available now.

The survey had a margin of error of plus or minus 3.8 percentage points.

As bad as those numbers are, Pima County residents are even more pessimistic than the rest of the state, with 75 percent predicting business conditions will not improve in six months.

There will be no real signs of economic recovery in Arizona for two to three years, McPheters said. Meanwhile, there will be continued high unemployment and weak consumer demand, with a possibility that there will be a "double dip" recession, McPheters said.